How to Get Lucky

The House that Jack Built... with MONEY
The House that Jack Built… with LUCK (and money)

Last month, Howard Marks of Oaktree Capital gave Jack Dorsey a good load of crap for claiming that there was no luck involved in his path to success.

Success is never accidental. No accidents, just planning; no luck, only strategy; no randomness, just perfect logic. –@jack

Marks points out that Dorsey would have been unlikely to found Twitter had he been born in Bangladesh. But clearly it was Jack’s awesome strategic planning skills that arranged for him to be born in the United States.

Aside from the circumstances of birth, there is an easy test to determine if success in an activity should be attributed to luck or skill: Ask if you can lose on purpose. If you can lose on purpose, then there is skill involved [1]. It would be hard to intentionally lose at a craps table (betting strategy notwithstanding).

Can a person intentionally fail at building a billion-dollar company? Of course. And that is because luck is a skill.

Given the role that luck plays in startup success, it should be considered the most formidable skill of all. Here’s how to improve on it [2]:

    1. Maximize Your Chance Opportunities. Be open to diverse people and experiences. Your lucky break isn’t going to find you in your cubicle.

    2. Listen to Your Intuition. It’s usually right, and shortens your deliberation time.

    3. Expect Good Fortune. Having positive expectations makes you attempt more things and persevere more. And if you act positively, the world reacts positively. That’s one of Newton’s laws.

    4. Turn Your Bad Luck Into Good. Because luck is a skill, any bad luck that arises is a result of something you did. Learn from it and move on. Time spent feeling bad is time spent being unlucky.

Just like Jack Dorsey, I had the incredible foresight to be born in the United States. That makes me luckier than 98% of the other humans on the planet. I managed to not come out mentally retarded or disfigured. Not excessively so, anyway. I think that puts me in the top 1%. This is a very good bet.

I am also clearly very stupid, so it is another testament to my luck that I haven’t ended up dead. I’ll list this alongside my credentials in the team’s executive summary.

What am I doing sitting at home writing code, anyway? I should go to Vegas and get lucky.

See Also:
success equation luck factor

1. Michael Mauboussin. The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing. 2012.

2. Richard Wiseman. The Luck Factor. 2004.

Don’t Rush the Cash Flow

TWTR crashed 20% last week after Twitter’s earnings report indicated a slowdown of user growth.

The income statement, at first glance, would appear to be a winner – TWTR beat analysts’ revenue expectations by 12%, with reported earnings of 2 cents per share as opposed to the 2 cent loss that was expected.

Silly Twitter. You’re an internet stock, which means shareholders care about user growth, not cash flow. Every last cent should go towards making the fire burn hotter.

Remember, Facebook was founded in 2004 and did not become cash-flow positive until the end of 2009. Google was founded in 1998 and turned profitable in 2001, with the invention of Adwords. LinkedIn was founded in 2003 and probably didn’t become profitable until 2010.

Check out these gross margins:

Quarterly Gross Profit Margins, Dec 2013. Source:
Quarterly Gross Profit Margins, Dec 2013. Source:

Twitter, you have lower profit margins than Facebook, Google, or LinkedIn. If you are coming back with positive net income, you’re doing something wrong. Your cash flow is too strong. Get back out there and lose more money for your shareholders!

But only in the name of user growth, of course.

See Also:
Which Internet Stock is the Most Overvalued? –New Yorker

Twitter isn’t profitable. Neither are these other public tech companies.

According to the Hobby Loss Rule, a business that is not profitable for at least three years out of five is considered a personal hobby, not a for-profit business. Taxpayers cannot deduct losses incurred from pleasure activities.

Twitter isn’t a real business! It’s just Jack Dorsey’s pet project that he’s using as a tax shelter! SEE.

Are the world's biggest tech companies profitable?

See Also:
Twitter isn’t profitable. And neither are these other huge public companies –pando daily